DUBAI (Reuters) - Revenue from data and corporate customers will drive growth at Etihad Etisalat 7020.SE (Mobily), the chief executive of Saudi Arabia's No.2 telecom operator said on Saturday after it beat forecasts with an 11 percent rise in quarterly profit.

The company's focus on these two segments reflects market dynamics in the kingdom, where conventional call margins have slumped due to increased competition and substitute services such as Internet-based phone calls and instant messaging.

Mobily seems to have responded to these industry-wide pressures better than many of its Gulf peers, posting a fourth-quarter net profit of 1.88 billion riyals ($501.31 million), up from 1.7 billion riyals in the prior-year period.

Analysts polled by Reuters on average forecast Mobily would make a quarterly profit of 1.78 billion riyals.

Mobily's shares were up 2.1 percent at 1155 GMT on the Riyadh bourse, outperforming the main index .TASI, which was up 0.2 percent.

The firm, an affiliate of the United Arab Emirates' Etisalat (ETEL.AD), has recommended a cash dividend of 1.15 riyals per share for the fourth quarter.

"We're positioning Mobily to not only be a mobile operator but a total telecom and ICT player in Saudi Arabia," chief executive Khalid al-Kaf told Reuters. "The game will be data, adjacent services and integrated services ... it won't anymore be a traditional type of voice revenue."

DATA SURGE

Data accounted for 27 percent of Mobily's full-year revenue, up from 22 percent in 2011. This will probably top 30 percent in two years and could hit 40 percent by about 2017, Kaf said. Data volumes rose more than four-fold in 2012 from a year earlier.

Mobily is vying with state-controlled Saudi Telecom Co 7010.SE (STC) to be the kingdom's top operator and between them they accounted for nearly 90 percent of sector revenue in the nine months to September 30, according to NBK Capital.

Former monopoly STC has responded to a 40 percent fall in annual profit from 2006 to 2011 by exploiting its dominant position in fixed-lines to woo back customers with packages including Internet, phone and TV services.

But Mobily aims to reduce that advantage and will soon sign a formal partnership agreement with fixed-line operator Atheeb Telecom (7040.SE), Kaf said, having already announced a memorandum of understanding (MoU) with the Bahrain Telecommunications BTEL.BH (Batelco) affiliate in December.

"Attracting business (customers) will become part of the fixed-line offering," said Kaf, adding Mobily will become a re-seller for Atheeb's estimated 2 million lines.

Mobily is in the midst of launching IPTV services and offers fixed Internet services through its subsidiary Bayanat Al Oula.

It aims to connect 500,000 homes with fiber by year-end and the Atheeb deal will allow it to offer fixed-line calls.

Corporate revenue, which includes the public and private sector, rose 71 percent in 2012 and will maintain "high double-digit growth" this year, said Kaf. It accounted for about 10 percent of total revenue in 2012.

PRICE WAR

The Saudi telecom regulator this month set a May 4 deadline for companies to submit applications for three mobile virtual network operator (MVNO) licenses in the kingdom.

Ahead of this deadline, Mobily has signed MoUs with "two or three" foreign MVNO companies, Kaf said.

"I don't want an MVNO that will (compete) on price - the price war in Saudi Arabia started two years (ago)," he said.

Instead, Mobily wants to host an MVNO that can address certain customer groups "better than we can", said Kaf.

Mobily plans to spend about 22 billion riyals over the next five years expanding its network, but the company has no immediate financing needs, Kaf said.

The firm remains in talks with STC over a possible tower-sharing deal. Kaf had told Reuters previously that this would likely be concluded by the end of 2011.

"It's not off, discussions are going on but at a slow pace," he added.